Fuel demand grows by 0.7% in FY14; slowest in 12 years

New Delhi: India's fuel demand rose by its slowest pace in almost 12 years after monthly price increases chipped away growth in diesel consumption.

The world's fourth-largest oil consumer saw petroleum product demand growing by a meager 0.7 percent to 158.197 million tons in 2013-14, according to the latest oil ministry data here.

The growth is the slowest since 2001-02 when demand had expanded by 0.4 percent to 100.432 million tons.

Diesel, which is India's most consumed fuel accounting for close to 45 percent of the total petroleum product demand, recorded a 1 percent drop in demand at 68.370 million tons, the first drop in consumption since 3.7 percent fall in 2001-02.

Indian Oil Corp (IOC) Chairman R S Butola had a few weeks back stated that the demand for diesel had fallen for the first time in more than a decade as the move to deregulate diesel rates through small monthly increases has chipped away the demand.

"Small adjustments of 50 paise every month has brought some parity with cost," he had said.

Diesel rates have risen by a cumulative Rs 8.33 per since January 2013, leading to drop in demand.

Also, better power production which saw lesser burning of the fuel in gensets, had resulted in moderation in diesel demand.

Diesel demand had risen by 6.7 percent in 2012-13 to 69.08 million tons. It posted a record 11.1 percent growth rate in 2007-08 and since then had showing near 8 percent growth.

India had recorded a 6 percent growth in fuel consumption in 2012-13 to 157.057 million tons, according to the oil ministry data.

Petrol consumption in 2013-14 rose by 8.8 percent to 17.129 million tons while LPG demand was up 4.7 percent to 16.337 million tons.

The consumption of petrol had dropped when the fuel was deregulated in June 2010 but diesel continued to see rise in consumption as it was heavily subsidised thereby discouraging people to use it optimally.

Now, petrol is at par with its cost of production but the current selling price of diesel still is a Rs 5.49 a litre lower than its cost.

Besides losing Rs 5.49 a litre on diesel, fuel retailers are currently losing Rs 34.43 per litre on kerosene sold through the public distribution system and Rs 506.06 per 14.2-kg cylinder of domestic cooking gas (LPG), according to IOC, the nation's largest oil refining and marketing company.